At its latest meeting, the IEAs Shadow Monetary Policy Committee (SMPC), a group of leading monetary economists that monitors developments in UK monetary policy, voted to raise interest rates by seven votes to two. No members voted to reduce interest rates and two of the members who voted for a rise would have preferred a 0.5% rise.

Many members were increasingly worried about sustained increases in the measures of monetary growth, particularly broad money. SMPC Chairman, David B. Smith commented that broad money was growing rapidly and the economy was demonstrating all the indications of an excess supply of money. As a consequence, he believed that there was now an overwhelming case for raising interest rates by 0.25% and that further increases would probably be needed subsequently. Gordon Pepper, one of the members voting for a 0.5% rise, believed that given inflationary time lags are long and variable, there is a strong case for a double rate rise. It is important, argued Pepper, to avoid the risk of doing too little too late. A number of members also expressed concern about the supply side of the economy, given the recent big rise in the minimum wage and an apparent slowdown in immigration.

Those voting against an increase in interest rates felt that the Bank of England should allow time to see the effects of the previous rate rise. It was felt by the two members voting for no change that there was little sign of inflationary expectations increasing and that we should wait for further developments both in inflation and in the real economy, before moving interest rates.